Costa Coffee is amongst the largest café chains globally besides being an early entrant to India. How has the brand grown over the years?
Costa Coffee, founded in 1971 by Italian brothers Sergio and Bruno, is today the largest café chain in the U.K. and with operations in 28 countries it is the second-largest café chain in the world. Costa Coffee entered India in September 2005 with the opening of its first outlet in New Delhi. Since its launch, Costa Coffee has set new benchmarks in coffee retailing in the country. Over the last few years, Costa has created a distinct image for itself with its great coffee and food, friendly and efficient service and stylish and relaxing surroundings. Currently, Costa operates 95 cafés in India spread over Delhi-NCR, Jaipur, Agra, Mumbai, Bangalore and Pune.

What’s the USP of Costa Coffee compared to other biggies like Café Coffee Day, and Barista Lavazza?
While we may be smaller in terms of number of stores, we are the preferred coffee brand in the locations and cities we are present in. We were the first chain to offer an international brand experience in the coffee chain sector in India and enjoy the international brand recall and image advantage. Our coffee, we believe, is a great differentiator. Costa’s hand-crafted coffee, extracted from the Mocha-Italia blend, is today the preferred taste among coffee lovers around the world. A blind taste research conducted in the U.K. last year revealed that 7 out of 10 customers in the U.K. preferred the Costa Cappuccino over the other two leading brands. The other area of differentiation is that we offer the best-in-class range of café food in the country today. While being within the broad contours of Western café cuisine, our range of food is localized to suit the Indian taste profile.

With fewer stores than CCD or Barista, and hardly much marketing, how do you hope to beat the competition?
The coffee chain business is all about maintaining the brand standards, which in our case is very well defined and we deliver these values consistently. Costa’s coffee experience is based on delivering the perfect espresso-based drink combined with great coffee shop food served in a comfortable and chic environment. As long as we continue delivering to this statement, it will always keep us ahead of competition.

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Source : IIPM Editorial, 2012

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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The cafe market in India is turning both febrile and frothy as big guns like Starbucks prepare to move in for their operational launch and existing players position themselves for a landgrab market opportunity.

India is still by and large a country of tea-swilling limeys but the trend towards reaching out for that morning cup of joe is fast catching fire. So, even as North India tightly holds on to its tea bags, the South loves to measure its daily drone with coffee spoons. Statistics reveal that the tea to coffee consumption in India is still 7:1, but Java drinkers are fast making up for the lost opportunity. Still, India is not a major coffee consumption market even though it is the world’s sixth-largest producer and fifth-largest exporter of coffee, exporting roughly 5% or close to six million bags in 2010-11 fiscal. India’s annual coffee output is over 300,000 tonnes, only a third of which is consumed domestically. Over 90% of the coffee production takes place in the developing countries while consumption happens mainly in the industrialised economies.

But of late, India seems to be turning the corner in terms of coffee consumption. “Over the past few years coffee has transitioned from being a traditional beverage consumed mainly in South India to a beverage with a national presence, consumed in several forms and retail formats," says Jawaid Akhtar, Chairman, Coffee Board of India. According to the figures given out by the Coffee Board, coffee consumption has grown in the non-south regions at 42% annually while it has grown at 3.5% per annum in the southern states between 2003 and 2008. With the emergence of an aspirational and young middle class who are more cued in to international tastes, coffee café culture is slowly but steadily picking up in the country. Today, cafés are opening up across all urban centres and coffes joints are fast becoming modern, more suave renditions of speakeasies where the urban educated youth loves to hang and schmooze around and spill the beans on current happenings and events.

Currently, India has roughly 1,800 cafés across major cities, with Café Coffee Day – which opened its first branded coffee outlet in Bangalore way back in 1997 – leading the race with over 1,200 cafés. But with the entry of Lavazza in 2007, Costa Coffee in 2005, and now the impending arrival of Starbucks (in partnership with Tata Coffee) – the gold standard of café culture worldwide with 50 cafés planned for launch by the end of this year – the Indian coffee landscape is bracing up for greater competition where consumers will have a more liberating choice when ordering their invigorating shot of espresso. Even fringe players like Australia’s Gloria Jeans and Dunkin’ Donuts have entered the market and a few more are expected to dip their toes in the swelling tide of the café boom spreading across India.

The bloom in cafés has resulted in the branded café market reaching an inflection point. Coffee-shop sales have now touched $180 million, out of the country's annual coffee sales of about $667 million. Though still small, the branded café market is growing at 25%, and analysts predict it has the potential to reach $800 million, and to 5,000 cafés by 2015. As per capita coffee consumption in India is just over 60 grams, compared with 4.5 kilograms in France and Japan, and 6 kg in Italy and the U.S., coffee retailers undertandably see a huge growth potential and revenue upside in the days ahead.
 
T. Radhakrishnan, Vice President of Tata Coffee, says, “Being the largest Indian coffee producer, we will fulfill Starbuck’s sourcing needs, and help them with insights on the market…going by Starbucks reputation, they will be a big force to reckon with in India, and revolutionise the café market here with their global standards and product offerings.” Starbucks is looking to create different entry-points for different demographics and apart from coffee it plans to whip up a smorgasbord of cuisine for Indian palates. The company is aiming for cafés at Tata hotels, and retail outlets in New Delhi and Mumbai with an initial investment of roughly $80 million. In the course of time Starbucks will move its cafés to malls, railway stations, airports and offices.

Starbucks' operations in India is bound to raise the coffee temperature in the Indian market and could nibble away the business of another premium player in the market, Costa Coffee, which currently runs 95 cafés spread over Delhi-NCR, Jaipur, Agra, Mumbai, Bangalore and Pune. Says Santhosh Unni, CEO of Costa Coffee India: "Competitors like Starbucks are not new to us. We compete with them successfully in most of the countries we operate in.” To maintain its premium product differentiation, Costa Coffee offers a range of café food (localised to suit Indian tastes) along with its trademark handcrafted Mocha-Italia coffee blend. Clearly, the premium coffee café space will be an interesting space to watch out for as the two global biggies battle for supremacy in the Indian market. According to Unni, “The biggest challenge facing us today is the relatively small size of the café market. India being a large country with growing income levels and spending can easily accommodate three to four large coffee retailers with pan-India footprint."

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An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Coca Cola had globally publicised its voluntary decision not to market to children. But the latest ad clearly puts paid to that. Have they done wrong? or not? 4Ps B&M’s Consulting Editor Monojit Lahiri investigates...

A while ago, amidst suitable media glare and fanfare, Coke – along with a cluster of corporate global heavies – signed an agreement to categorically not initiate, indulge, involve or participate in any activity that consciously targets kids under a certain age. “We have a global Responsible Marketing Policy that covers all our beverages, and we do not market any products directly to children under 12,” says The Coca Cola Company.

They (rightly) reckoned that directly marketing Cola products to children could send out wrong signals – as the general inference is that sugary and carbonated drinks lead to not only obesity and bone loss, but a host of other health issues. In children, the effects are worse and longer lasting. While all right-thinking, concerned parents and elders applauded this fine, worthy CSR move (“Hey, the guys have a conscience, after all!”), one fine morning came along a spanking new ad of Coke (“Ummeedon Wali Dhoop, Sunshine Wali Aasha...”), which had a most hummable tune and cinematography worth its weight in gold. Shockingly, almost throughout the advertisement, children were featured singing the song – some looking quite apparently below the age of 12. Worse, the ad ends with a statement, “Millions share a Coca Cola everyday.” This magazine had instantly picked up the issue in the last fortnight and pointed out the clear fly-by given to the much touted voluntary decision of Coke to not market to children.

To its fair credit, the TVC is charmingly conceived, executed and packaged, totally children-friendly, superbly written – by McCann’s gifted, multi-faceted head honcho Prasoon Joshi – and reinforced with an eye opening series of facts juxtaposed smartly to entertain and enlighten in one fell swoop. In fact, Ummeedon Wali Dhoop, Sunshine Wali Asha, today, is a hugely loved and popular anthem with kids, everywhere, because of its simplicity, charm and inspirational tone. So, what’s the problem?

That’s exactly the problem, per se. The more children that like the ad, the more the probability of them falling for the cleverly positioned ruse. Was this an inadvertent mistake on the part of Coke (featuring children, that is) or is this a supremely shrewd advertising campaign meant to raise hackles? Veteran Ad person Esha Guha is the first to fling her glove into the arena and declare war! “Prasoon is a terrific writer... You give him a brief and he’ll give you a song! However, this entire TVC would’ve been great had not the ‘millions share a Coca Cola everyday’ come in as last line – which, to me, is a sneaky way of leveraging product placement! It’s a piece of brilliantly crafted camouflage, very creatively distracting to represent, in wonderfully inspirational and uplifting manner, hope, sunshine, optimism – the works.” Dentsu’s NCD Soumitra Karnik – ex-JWT, creative head who master-minded several award-winning campaigns, including the memorable Youngistaan – is not so sure and believes that it is a conflict of letter versus spirit. “Agreed, in theory it may have strayed a bit, but overall the TVC offers a brilliantly, optimistic, warm and feel-good vibe with great lyrics and most significantly, sung by children in joyous collectivity. Kids are our greatest change-agents and their bright shining faces, energetically singing those exalted lines, for me, scores over a technical flaw,” says Karnik. He (all set to change Dentsu into a solidly creative agency) believes that compared to the mess around (scams, end of world in 2012, drubbing at Australia) this TVC represents a welcome change. So, he’s willing to “let this one pass!”
 
Post-grad student Shrishti Jha agrees. She feels that most people are unlikely to view this TVC in a “negative and narrow-minded way” and will view it for the joyous ambience it creates, “The lyrics are outstanding and so is the overall presentation! Where does the camouflage and surrogate factor come in? It’s neither a product hard-sell at all, nor does it nudge you to lean on the Coke Corp image. Like Hum Mein Hai Hero, Ummeedon Wali Dhoop charges you up in a charming, vigorous and vibrant way infusing positive emotions in your being. I love it. So do my friends. Forget the killjoys…!” Paris-based and Santiniketan-trained graphic artist Pia Sen, is up next. The pretty and petite 32-year old (who visits India regularly is fully clued-in to this issue) comments, “The TVC is crafted in a deceptively innocent manner that gives this impression of upliftment and optimism, very successfully. Intelligently choreographed, it brings the millions share… line to form a telling conclusion about the product as a feel-good, bonding product. [Yet], for me, somewhere, it is unethical and goes against the spirit of the signed document. Like in life, intangibles and grey areas are always the trickiest.”

Mitali Lahiri, Senior Writer of the Kolkata-based Ad Agency Magnum Intergrafix, is not amused. “It’s obviously done in a clever, slick way to make friends and influence people! The chocolaty topping is suitably sensitive with radiant children looking forward to a cheerful, sunshine planet… a world that hits more on love than hate… sharing, caring, trees, mats and fairy tales in place. So far, so good – but hey, how does Coca Cola feature in all of this, guys? For a while this TVC works like a happy drug and just as you are about to succumb, Coke enters to claim millions who love Coca Cola, opens happiness! But is GenNext supposed to share happiness with less calcium in their bones, broken bones, unhealthy disposition?!”

The gurus of advertising have repeatedly said that underpromise, overdeliver. At least don’t promise what you can’t deliver. Given the killing effects of competition, is Coca Cola slowly but surely revoking the voluntary decision they had taken on a global scale? I don’t have the answer to that. All I can tell is that I love the song, but won’t let my kids have the drink. Over to you, gentle reader…!

For more articles, Click on IIPM Article

Source : IIPM Editorial, 2012

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Over four years after its stake sale to Bajaj auto Austrian bike maker KTM has launched its first offering in the country. CEO Stefan Pierer briefs 4Ps B&M on their strategy to gain volumes from the Indian market

Globally known for its off-road and racing motorcycles, Austrian bike maker KTM is now all set to dazzle the Indian consumer with its orange offerings. Starting with the 200 Duke, KTM is planning to expand its product line-up in alliance with its partner Bajaj Auto. Considering the fact that Bajaj Auto holds a 40% stake in KTM, the manufacturing and distribution capability of India’s second largest two-wheeler maker is expected to give a strong push to KTM’s presence in the domestic market. In fact, the company expects the Indian market to become the largest volume puller for their portfolio in the next 3-4 years. 4Ps B&M speaks exclusively to Stefan Pierer, CEO, KTM Motorcycles AG about the India plans of the company. The Business and Energy Management graduate from the Montan University in Leoben, Austria, throws light on the alliance with Bajaj, the product plans for India and export opportunities available in the domestic circuit. Edited excerpts:


KTM has been manufacturing the Duke series of motorcycles at the Bajaj Auto plant in Chakan and exporting the 125 Duke to other markets. However, the company chose to start its India operations with the launch of the 200 Duke. Why are you not introducing the 125 Duke yet? Also, what are the other products that you are planning to launch in the Indian market in the coming years?
We started manufacturing 125 Duke in February last year and we are currently exporting it to Europe and Japan. We can launch this product in the Indian market any time, but we believe that the Indian market is still not ready for such a premium product in the 125cc segment. Hence, we decided to start our journey with the 200 Duke as Honda is the benchmark in the 250cc segment. So far, we have no plans to launch the 125 Duke in the Indian market, but if there is a demand for the product, we may look at launching it at a later point in time. Apart from the 200 Duke, We are planning to launch the KTM 350 in India by 2013. We have many models in our global portfolio, but they are more of racing models and hence, they aren’t really suitable for the Indian market.

Currently, KTM sells most of its overall volumes in Europe. What kind of expectations do you have from your India operations, especially considering the fact that Bajaj Auto will be taking care of the sales and marketing of KTM products in the Indian market?
We currently have a capacity of 30,000 units at Bajaj’s Chakan plant. Out of this, we are looking at exporting close to 20,000 units this year. We can double the capacity if the product receives a huge domestic demand. In the next 3-4 years, KTM is looking at India becoming the single biggest market for our bikes. We are expecting volumes to grow up to 50,000-60,000 units in that period. India is growing not just in terms of quantity of bike units sold but also in terms of demand for bigger displacement bikes. We could expect more technology-laden bikes with bigger twin cylinder engines from KTM in India soon. India is growing not only in volumes but also in displacement. For instance, look at the plans of Honda for the domestic market. They are bringing bikes with bigger engines as they are convinced that the Indian consumer has started to move up in the segment. And as players like Honda along with other Japanese bike makers bring many more such models to the Indian market, the technology gets an immediate push.
 
As per the announced plan, the Bajaj Probiking showrooms will now be converted into KTM showrooms, which will also sell Ninja products under the same roof. How much time will this entire process take and are you comfortable enough selling your products along with the Ninja products?
All Probiking showrooms across the country will be converted into KTM showrooms within the next 4 to 6 weeks. We have no issues, especially considering the fact that KTM and Kawasaki produce motorcycles with different characteristics. These bikes do not compete with each other and we have no problems with the Ninja being sold under the same roof. Even in Europe, KTM bikes are sold in the same showrooms alongside other bikes. In fact, we believe that the multi-brand showrooms give a clear chance to the consumer to compare all the available offerings under one roof rather than moving from one showroom to the other for the same.

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Source : IIPM Editorial, 2012

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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KTM has a real chance at making a mark in the premium segment. But it has to aggressively convey its largely unknown brand attributes

KTM was an unknown brand for most Indian consumers when Bajaj Auto decided to pick up a 14.5% stake in the Austrian bike maker in November 2007. Even diehard motorcycle fanatics only knew that it is an off-road bike maker known for its orange motorcycles that have won many accolades during several motorcycle championships. While the recall for the brand has hardly improved over the past years, Bajaj Auto has hiked its stake to 40% in the company. For many months, industry watchers believed that the stake in KTM will at the most help Bajaj sharpen its focus on cutting-edge technology backed by a strong R&D.

However, Bajaj has other plans, as the Pune-based two-wheeler maker decided to launch the brand in the domestic circuit. In fact, it was during the 2012 Auto Expo that the Indian consumer got the first opportunity to get a touch and feel of the product.

Enthused by consumer feedback during the expo, KTM recently launched its first offering, the 200 Duke, in the Indian market in alliance with its partner Bajaj Auto. Going forward, it plans to compete with the likes of Honda and Yamaha in the premium motorcycle segment. But what chances of penetration can you hope for as a relatively unknown brand with an equally unconventional lineage (Austrian) from the Indian perspective?

As per the plan announced by Bajaj Auto (which is responsible for the sales, marketing & distribution of KTM products in India), the company will be rebranding its 34 ‘Probiking’ sports bike outlets as KTM Stores in the country. In addition, Bajaj will be opening 6 new showrooms in Dehradun, South Mumbai, Goa, Lucknow, Kathmandu and Guwahati by the end of this fiscal to expand KTM’s presence across the country. “When we invested in Probiking in 2003, we were very clear of the fact that we will need an exclusive distribution network for premium motorcycles. What Bajaj was 10 years ago for the Indian consumer, KTM is today,” said Rajiv Bajaj, MD, Bajaj Auto.

However, here’s the catch: Bajaj will be selling the KTM products along with the Kawasaki Ninja 250R and 650R (which is also distributed by Bajaj in the country), though the top-end Pulsar 220 and 200 bikes will now be sold through Bajaj’s outlets. In other words, Bajaj will retail both KTM and Kawasaki products from the same showroom, which may create competition under the same roof for KTM. But Stefan Pierer, CEO, KTM Motorcycles AG is unfazed as he comments, “We have been selling KTM products in Europe in many multi-brand showrooms and we have been very successful. We do not see any issue selling our products along with Kawasaki’s products as they have very different characteristics,” believes Pierer.

As per SIAM data, the 125cc-250cc segment sold 2.13 million units in the April-December 2011 period, with Bajaj Auto topping the charts with unit sales of 1.08 million units. However, it is the 250cc+ segment where Bajaj Auto has missed out in a big way. During the first nine months of this fiscal, the segment sold 70,340 units as Royal Enfield stood at the pole position with sales of 55,407 units followed by the only practical competitor Honda Motorcycle & Scooters India (HMSI) with 14,303 units. As compared to the last fiscal where HMSI just sold 26 units during the same period, the huge growth comes on the back of the launch of CBR 250R in the Indian market. For the less informed, it is the same segment buyer that KTM is targeting with its newly launched 200 Duke.

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Source : IIPM Editorial, 2012

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Reinventing a brand is a huge challenge. There are times, however, when managers don’t have choice; they have to reinvent their brand if it is to remain relevant

At Northwestern University’s Kellogg School of Management, the branding faculty defines a brand to be a set of associations linked to a name, mark or symbol associated with a product or service. The key word in this definition is associations; a brand is all the connections people make when they see a particular name or symbol. When people see the Dom Perignon, for instance, they generally think about celebration, luxury, expense and special. When they see Apple they think about innovation, technology, style and Steve Jobs. All of the associations are part of the brand.

The associations around a brand can endure for many years. This is one of the reasons why brands are so valuable; they are long lasting assets. Coke is more than 100 years old, Guinness is more than 200 years old and Harvard is more than 300 years old. Brands don’t necessarily fade away; there is no reason why a brand couldn’t continue for 500 years or more. The problem is that the associations built around a brand can be exceptionally difficult to change. Once people form a connection it becomes hard to break it. BMW is closely linked to German engineering and Volvo is linked to safety; it is hard to get people to stop making the connections. The stronger a brand, the harder it can be to evolve it because the associations are so deeply entrenched. It is easy to shift the associations around a new or relatively unknown brand, because few people have deeply held beliefs. It is much harder to change how people think about well established brands like McDonald’s or Sony.

Nonetheless, there are times when reinventing a brand is essential. Changes in technology, for instance, may force a company to evolve its brand to keep up with the latest developments. Competitive moves might also mean that a company has to reinvent its brand to remain unique and relevant in the world.

Reinventing a brand is often called repositioning a brand; the task is the same, changing the associations built around a name or mark, or changing the position in the market. Repositioning is difficult in the best of times but there are two situations that present unique big challenges. First, it is hard to reposition a brand when the core business is struggling. The problem is that repositioning takes time and money. When a business encounters slumping sales, it is difficult to invest in a brand repositioning. Indeed, when business is soft executives often do precisely the opposite thing and cut spending on branding. Weak results can set up a negative spiral, where poor sales lead to cuts in market, which in turn lead to weak sales and further cuts in marketing. Repositioning a brand while caught in this viscous spiral is virtually impossible; the resources are too limited.

Second, it is hard to reposition a brand when it has slipped from the public view. To establish associations, a brand needs a certain amount of visibility; you can’t define a brand if people don’t see it. Brands that slip from the visibility remain static, since there is nothing to change the associations that exist in the market. The brand gradually loses awareness and the brand’s associations or meaning doesn’t change. Oprah Winfrey, one of the world’s strongest brands in the world of entertainment, will likely find this a challenge in the coming years. When she had her daily talk show, Oprah could continuously enhance and refine her brand because she had enormous visibility; she was on television every day, speaking directly to millions of people. Now that she has ended her daily show she will be less visible, and this will make it harder for her to reposition her brand.

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Source : IIPM Editorial, 2012

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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As an organisation grows beyond its home borders, its leaders must be sure to export the company’s culture as well as its products

4Ps Business & Marketing, in a strategic alliance with the new york times service, presents a column by howard Schultz, Chairman, President and CEO of Starbucks corporation

Great global brands do not succeed across cultures because they are cool or trendy. They succeed because they remain relevant to people inside as well as outside the company – regardless of where they were founded or where in the world they operate.

That’s why, as an organisation grows beyond its home borders, its leaders must be sure to export the company’s culture as well as its products.

This has been Starbucks’ strength as well as our greatest challenge since we first decided to open a store outside North America in 1996. Back then, none of our senior leaders had any international experience. In fact, we hired a consultant who came in and essentially told us that our plan to expand into Japan wasn’t going to work. Our no-smoking policy for our stores would be a disaster. Japanese customers wouldn’t walk around the streets with coffee in a paper cup. But our conviction that we had something universal to offer customers in addition to our coffee – a place to personally connect with others – pushed us forward, and we opened our first store in Tokyo.

Fifty-four countries later, our conviction has not wavered, yet more than at any other time in our history, we are asking ourselves how to remain relevant as times change.

For our coffee and our food, we have learned that each should reflect regional tastes and traditions but not deviate too far from our core. A vanilla latte in Zurich should taste the same as one in Chicago. In China, Starbucks stores would probably not sell noodles for breakfast; but we would – and do – include popular Chinese flavours such as sesame and green tea in our Frappuccinos. People don’t want from us what they can get down the block, but they appreciate our efforts to put a local twist on a muffin.

Even more important than our products, however, are the company’s guiding principles of respect and dignity, which fuel the personal connections we try to make with customers.

Instilling such internal values beyond a company’s home country is crucial, but it does not come with a handbook of instructions. It’s a subtle task, and there are concrete steps we’ve learned along the way that hold true to any company. These include dedicating enough resources from the outset to put the right culture in place, and launching a new market under the guidance of long-term employees to ensure that like-minded talent is hired. Local leaders can then model the behaviour they want their people to emulate, celebrate behaviours they want to perpetuate and listen to what is important to the people they hire.

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Source : IIPM Editorial, 2012

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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